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Required information The following information applies to the questions displayed below.] Cane Company manufactures two produRequired information (The following information applies to the questions displayed below.) Cane Company manufactures two prodRequired information (The following information applies to the questions displayed below.) Cane Company manufactures two prod

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Answer #1

Solution 6:

Differential Analysis - Sale Beta (102000 units) (alt 1) or Discontinue Beta (Alt2)
Particulars Sale Beta (102000 Units)
(Alt 1)
Discontinue Beta (Alt 2) Differential effect on income (Alt 2)
Details Amount Details Amount
Revenue 102000*$145 $14,790,000.00 $0.00 -$14,790,000.00
Costs:
Direct Material 102000*$24 $2,448,000.00 $0.00 -$2,448,000.00
Direct Labor 102000*$27 $2,754,000.00 $0.00 -$2,754,000.00
Variable manufacturing Overhead 102000*$17 $1,734,000.00 $0.00 -$1,734,000.00
Variable Selling Expenses 102000*$20 $2,040,000.00 $0.00 -$2,040,000.00
Traceable Fixed manufacturing overhead 118000*$30 $3,540,000.00 $0.00 -$3,540,000.00
Common fixed expenses 118000*$22 $2,596,000.00 118000*$22 $2,596,000.00 $0.00
Income / (Loss) -$322,000.00 -$2,596,000.00 -$2,274,000.00

solution 7:

Differential Analysis - Sale Beta (52000 units) (alt 1) or Discontinue Beta (Alt2)
Particulars Sale Beta (52000 Units)
(Alt 1)
Discontinue Beta (Alt 2) Differential effect on income (Alt 2)
Details Amount Details Amount
Revenue 52000*$145 $7,540,000.00 $0.00 -$7,540,000.00
Costs:
Direct Material 52000*$24 $1,248,000.00 $0.00 -$1,248,000.00
Direct Labor 52000*$27 $1,404,000.00 $0.00 -$1,404,000.00
Variable manufacturing Overhead 52000*$17 $884,000.00 $0.00 -$884,000.00
Variable Selling Expenses 52000*$20 $1,040,000.00 $0.00 -$1,040,000.00
Traceable Fixed manufacturing overhead 118000*$30 $3,540,000.00 $0.00 -$3,540,000.00
Common fixed expenses 118000*$22 $2,596,000.00 118000*$22 $2,596,000.00 $0.00
Income / (Loss) -$3,172,000.00 -$2,596,000.00 $576,000.00

Solution 15:

Computation of contribution margin per pound
Particulars Alpha Beta
Selling price per unit $180.00 $145.00
Variable cost per unit:
Direct material $36.00 $24.00
Direct labor $32.00 $27.00
Variable manufacturing overhead $19.00 $17.00
Variable selling expenses $24.00 $20.00
Contribution margin per unit $69.00 $57.00
Raw material required per unit (In pound) 6 4
Contribution margin per pound of material $11.50 $14.25
Rank 2 1

As current available material is sufficient to meet total demand of Beta product. Therefore extra material will be utilized in production of Alpha Product.

Therefore maximum price that Cane company is willing to pay for additional pound of material = Regular price + Contribution margin per pound of alpha = $6 + $11.50 = $17.50

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